COMMITMENTS AND CONTINGENCIES

3 Months Ended

Mar. 31, 2022

COMMITMENTS AND CONTINGENCIES [Abstract]

Note 17

COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company accounts for leases in accordance with ASC Topic 842, Leases (“ASC 842”). All contracts are evaluated to determine whether or not they represent a lease. A lease conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The Company has operating leases primarily consisting of facilities with remaining lease terms of one year to five years. The lease term represents the period up to the early termination date unless it is reasonably certain that the Company will not exercise the early termination option. Certain leases include rental payments that are adjusted periodically based on changes in consumer price and other indices.

Leases are classified as finance or operating in accordance with the guidance in ASC 842. The Company does not hold any finance leases.

The Company is obligated under operating lease agreements for office facilities in (i) Florida (two), (ii) Washington, (iii) Colorado and (iv) Argentina that expire in (i) December 2024, (ii) December 2022, (iii) February 2026 and (iv) July 2024, respectively. The Company also has two short-term leases related to offices in Pennsylvania and Massachusetts. These short-term leases are currently leased on a month-to-month basis. A short-term lease is a lease with a term of 12 months or less and does not include the option to purchase the underlying asset that we would expect to exercise. The Company has elected to adopt the short-term lease exemption in ASC 842 and as such have not recognized a “right of use” asset or lease liability for these short-term leases.

The Company’s lease agreements generally do not provide an implicit borrowing rate, therefore an internal incremental borrowing rate is determined based on information available at lease commencement date for purposes of determining the present value of lease payments.

Supplemental cash flow information and non-cash activity related to leases for the three months ended March 31, 2022 and 2021 were as follows:

	For the Three Months Ended March 31,
	2022		2021
Cash used in operating leases	$	77,117	$	30,154
ROU assets obtained in exchange for new operating lease liabilities	$	—	$	1,082,684

ROU lease assets and lease liabilities for the Company’s operating leases were recorded in the condensed consolidated balance sheet as follows:

	March 31, 2022		December 31, 2021
Right of use assets, net	$	798,016	$	859,637

Short-term operating lease liabilities	$	246,920	$	247,325
Long-term operating lease liabilities		551,970		611,523
Total lease liabilities	$	798,890	$	858,848
Weighted average remaining lease term (in years)		3.09		3.32
Weighted average discount rate		8.5%		8.5%

The components of lease expense were as follows for each of the periods presented:

	For the Three Months Ended March 31,
	2022		2021
Operating lease expense	$	78,781	$	27,312
Short-term lease expense	$	59,887	$	391
Total operating lease costs	$	138,668	$	27,703

Future lease payments included in the measurement of lease liabilities on the condensed consolidated balance sheet as of March 31, 2022, for the following five fiscal years and thereafter were as follows:

	March 31, 2022
2022	$	231,352
2023		286,670
2024		291,161
2025		85,726
2026		14,288
Thereafter		—
Total future minimum lease payments	$	909,197
Less imputed interest		(110,307	)
Total	$	798,890

Service Agreements

The Company entered into certain service agreements that provide for future minimum payments. The terms of these agreements vary in length. The following table shows the remaining payment obligations under these licenses as of March 31, 2022:

	March 31, 2022

Year ending December 31, 2022	$	728,844
Year ending December 31, 2023		1,741,439
Year ending December 31, 2024		1,887,595
Year ending December 31, 2025		1,600,000
Year ending December 31, 2026		400,000
Thereafter		—
	$	6,357,878

Legal Proceedings

From time to time the Company may be involved in claims that arise during the ordinary course of business. For any matters where management currently believes it is probable that the Company will incur a loss and that the probable loss or range of loss can be reasonably estimated, the Company records reserves in the condensed consolidated financial statements based on its best estimates of such loss. In other instances, because of the uncertainties related to either the probable outcome or the amount or range of loss, management is unable to make a reasonable estimate of a liability, if any. Regardless of the outcome, litigation can be costly and time consuming, and it can divert management’s attention from important business matters and initiatives, negatively impacting the Company’s overall operations. Although the results of litigation and claims cannot be predicted with certainty, the Company does not currently have any pending litigation to which it is a party or to which its property is subject that we believe to be material, except for the below.

Audet v. Green Tree International, et. al.

On February 14, 2020, John Audet filed a complaint in 15th Judicial Circuit in and for Palm Beach County, Florida against multiple parties, including Green Tree International (“GTI”), an indirect subsidiary of the Company, claiming that he owned 10% of GTI. The complaint seeks unspecified monetary damages equivalent to the value a 10% shareholder of GTI would have received in the subsequent Helix and Forian transactions, along with an equitable accounting and constructive trust to determine if Audet suffered any loss of profit distributions. The case is in the process of discovery and no trial schedule has been established. Each of the parties’ motions for summary judgment were recently denied. The Company believes the lawsuit is wholly without merit and will vigorously defend the claims in the lawsuit.

Nykiah Thomas v. Security Consultants Group, LLC d/b/a Helix TCS, Helix Technologies, Inc. and Shamson Sundra

On July 16, 2021, Nykiah Thomas, individually and on behalf of M’Seiya Thomas, a minor, filed a complaint in the District Court, City and County of Denver, Colorado, against Security Consultants Group, LLC d/b/a Helix TCS and Helix Technologies, Inc., subsidiaries of Forian, and Shamson Sundra, a former employee of Security Consultants Group, LLC, alleging negligence in the performance of security services in connection with a school shooting at STEM School Highlands Ranch that occurred on May 7, 2019. In January 2022, the parties reached an agreement in principle to settle this dispute. The settlement agreement required approval from the probate court because plaintiff M’Seiya Thomas is a minor, which order was granted by the probate court on May 6, 2022. As a result of this settlement, the Company anticipates dismissal of this case, with prejudice, during the second quarter of 2022.

Grant Whitus et al. v. Forian Inc., Zachary Venegas and Scott Ogur

On July 30, 2021, four former Helix employees filed a lawsuit in the Arapahoe County, Colorado District Court against the Company and Helix’s former managers asserting claims of breach of contract, promissory estoppel, breach of the covenant of good faith and fair dealing, civil theft and conversion, fraudulent misrepresentation, civil conspiracy, and unjust enrichment / quantum meruit, all relating to the plaintiffs’ claims that they were promised equity interest in Helix or compensation that they never received. The original complaint was never served, and in November 2021 the plaintiffs filed and served an amended complaint adding a fifth plaintiff, and seeking over $27.5 million in damages as well as attorneys’ fees and costs. The Company removed the matter to the United States District Court for the District of Colorado in December 2021 and both the Company and the individual defendants filed motions to dismiss on January 20, 2022. Plaintiffs subsequently amended their complaint on April 21, 2022, adding Helix TCS LLC and Helix Technologies, Inc. as defendants and advancing additional claims for breach of fiduciary duty and violation of the Colorado Wage Claims Act. The Company and the individual defendants anticipate that they will renew their motions to dismiss in advance of the June 1, 2022, responsive pleading deadline. Discovery has not yet begun. The Company intends to defend vigorously against the claims in the lawsuit.